Should You Do a Balance Transfer?

High-interest credit card debt can be soul-crushing. The financial strain it puts on you can make it hard to work toward your financial goals. It keeps you in servitude and, for many people, makes it hard to be motivated to pay it off.

With the average U.S. household owing $7,875 in credit card debt, it’s no wonder balance transfer credit cards are so popular.

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1. How’s your credit?

If you’re feeling desperate about your credit card debt, the last thing you want is to apply for a balance transfer card and get denied.

“Good credit is required to qualify, with the best terms only available to those with a good or excellent track record,” Smith says.

According to Experian, that’s a FICO score of 670 or higher. If your credit score is below that threshold, work to build your credit so that you have a better chance to qualify.

If you are in the good or excellent range but aren’t sure what your card of choice requires, call the bank and ask. If you apply and get denied without considering your credit, it can make it that much harder to stay motivated to pay off your debt.

2. How much do you owe?

Regardless of how much you owe, there’s no guarantee you’ll get a high enough credit limit on the new card to cover your full balance. The more debt you have, the lower the chance. Some credit cards even have hard rules as to how much you can transfer.

“The credit limit you’re allocated can depend on many variables,” says Smith. “So be prepared that it may not cover all of the debt you’d like to move to the new piece of plastic. However … transferring [even a little] is much better than nothing.”

If you owe just a few thousand dollars, you’ll have a better chance at getting a credit limit high enough to meet your needs. If it’s higher than that, though, you may need to apply for more than one balance transfer card to pay off all your debt at a lower interest rate.

What’s more, most balance transfer credit cards charge a fee, usually from 3% to 5%. So if you’re transferring, say, $10,000, you could pay up to $500 just to transfer your balance to the new card.

3. What does the math look like?

Before you apply for a balance transfer card, make sure the math works in your favor. Using a balance transfer calculator, consider the interest you’d pay on your current card(s) versus the balance transfer fee.

Also, keep in mind that if you don’t pay off the balance before the promotional period ends, the APR will increase. You’ll have to consider that in your math as well.

If that sounds like too much of a headache, a small rule of thumb may apply. If you’re able to pay off the debt within the next six months, you may end up paying less in interest than you’d pay with a balance transfer fee.

The longer your payoff plan takes, though, the more that interest has time to accumulate and it’ll be easier to justify paying a balance transfer fee. That said, using a calculator will give you a better estimate of what you’d save either way.

The next steps

Using a balance transfer credit card is a great way to pay off debt more quickly and save on interest. If your credit needs work or it doesn’t make sense mathematically to transfer, don’t worry. Just put your head down and focus on getting rid of your debt as quickly as possible.

Once you’ve been approved and have transferred your balance, focus next on your payoff plan. Calculate how much you owe and divide that number by the number of months you have with the 0% APR promotion. Do what you can to pay at least that much each month to ensure you don’t ever pay interest on the balance again.

As you work these steps, you’ll be that much closer to becoming debt free.

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